Transition to retirement with GESB Super
With a transition to retirement strategy, you can access your super as regular income while you’re still working.
Once you’ve reached your Commonwealth preservation age, you can use your super to start a regular pension, such as our Transition to Retirement Pension. This type of pension is known as a ‘non-commutable income stream’ because it doesn’t allow lump-sum withdrawals while you’re working.
There are three ways to use transition to retirement. You could:
- Increase your super - you'll continue to work and can sacrifice some of your salary to super
- Reduce your hours - you can work less without reducing your overall income, as your pension can make up for your lower salary
- Increase your income - you'll be receiving an income stream from a pension as well as your normal salary
You can find the right balance to suit your needs, with the flexibility to change your strategy. We recommend that you speak with a financial adviser, accountant or tax adviser to help you decide if transition to retirement is right for you.
Read the case study below to find out how transition to retirement works with GESB Super.
Meet John, age 60
- John has an annual salary of $72,000 and a GESB Super benefit of $346,600
- He decides to transfer all but $1,000 of his super benefit to our Transition to Retirement Pension. No tax applies on the transfer because GESB Super is a taxed scheme
- As John is 60, the income he receives from his pension is tax-free
Here are some examples of how John could use transition to retirement.
Please note: All examples and scenarios used on this page are for illustrative purposes only. The figures in the calculations are for the 2023/24 financial year.
Option 1. John could increase his super
John decides to transfer all but $1,000 of his GESB Super benefit into a Transition to Retirement Pension ($345,600) and selects an annual income payment of 5%. John also arranges with his employer to salary sacrifice contributions, so that his employer's SG contributions and his salary sacrifice contributions, equal his concessional contributions cap. Selecting a pension payment of 5% ensures John takes home a net income which is at least as high as his previous net income, while salary sacrificing up to his concessional contributions cap maximises his retirement benefit. As John is aged 60, the income stream he receives from his Transition to Retirement Pension is tax free.
| Before Transition to Retirement Pension | After Transition to Retirement Pension | |
|---|---|---|
Employer salary | $72,000 | $72,000 |
Less salary sacrifice | - | $19,5801 |
Employer salary after salary sacrifice | $72,000 | $52,420 |
Plus Transition to Retirement Pension income | - | $17,2802 |
Taxable income | $72,000 | $52,420 |
Less tax (including 2% Medicare Levy) | $15,307 | $8,3383 |
Net (after tax) income | $56,693 | $61,3624 |
As John is 60, his concessional (before-tax) contributions cap for 2023/24 is $27,5005.
John’s concessional contributions include his employer’s 11% Superannuation Guarantee (SG) of $7,9206. This means he can salary sacrifice up to $19,580. If John goes over his cap, then he might have to pay more tax.
By not changing his working arrangements and using the benefits of salary sacrifice, he has contributed $19,580 to his GESB Super account, while only reducing his pension account by $17,280.
Please note there is a contributions tax for very high income earners.
Find out more about salary sacrifice.
Option 2. John could reduce his working hours
John decides to work part-time and receive the maximum annual income payment (10% of his pension account balance). For the first year John will receive $34,560.
| Before Transition to Retirement Pension | After Transition to Retirement Pension | |
|---|---|---|
Employer salary | $72,000 | $36,000 |
Less salary sacrifice | - | - |
Employer salary after salary sacrifice | $72,000 | $36,000 |
Plus Transition to Retirement Pension income | - | $34,5602 |
Taxable income | $72,000 | $36,000 |
Less tax (including 2% Medicare Levy) | $15,307 | $3,4027 |
Net (after-tax) income | $56,693 | $67,158 |
By halving his work hours and receiving $34,560 from his pension, John has increased his net income by $10,465 in the first year.
However, his pension account has decreased by 10% from the income payments. In this example, John hasn’t increased his super by salary sacrificing. However, he can still choose to have his SG contributions made to his GESB Super account, which will start building his super again. The amount of these contributions will be less due to his lower salary.
Option 3. John could increase his income
John continues to work full-time. He chooses the maximum annual income payment (10% of his pension account balance). In the first year, John will receive $34,560 from his pension.
| Before Transition to Retirement Pension | After Transition to Retirement Pension | |
|---|---|---|
Employer salary | $72,000 | $72,000 |
Less salary sacrifice | - | - |
Employer salary after salary sacrifice | $72,000 | $72,000 |
Plus Transition to Retirement Pension income | - | $34,5602 |
Taxable income | $72,000 | $72,000 |
Less tax (including 2% Medicare Levy) | $15,307 | $15,307 |
Net (after-tax) income | $56,693 | $91,2538 |
By not changing his working arrangements, John has increased his net income by $34,560 in the first year. Although John’s pension account has been reduced by 10%, any contributions to his GESB Super account will start building his super again.
Your next steps
Before you decide to start a transition to retirement strategy, you should read the Retirement Income Pension Product Information Booklet. Our seminars and Retirement Options Service are also available to help you make an informed decision.
Once you've explored your options and decided that transition to retirement is right for you, you're ready to set up a Transition to Retirement Pension.
1 Salary packaged into GESB Super. GESB Super is a taxed scheme and concessional contributions are generally taxed at 15%. The concessional contributions cap is set at $27,500 for the 2023/24 financial year. We have assumed John has no unused concessional cap carry forward amounts available, and that John's employer has made Superannuation Guarantee contributions at the standard rate of 11% (to a total of $7,920 for the year). $27,500 - $7,920 = $19,580).
2 As John is aged 60, his income from an allocated pension is tax-free.
3 Includes low income tax offset of $214.
4 Calculated as taxable income less tax (i.e. $52,420 - $8,338 = $44,082), plus Transition to Retirement Pension income ($17,280).
5 The general concessional contributions cap is $27,500 for the 2023/24 financial year, indexed annually in line with Average Weekly Ordinary Time Earnings in increments of $2,500 rounded down.
6 As of 1 January 2020, salary sacrificing will not affect the amount an employer must contribute into your super. The current SG Rate is 11%, which means John's employer will contribute $7,920 into his super account. If this rate increases in future, John may need to reduce his salary sacrifice to avoid exceeding his concessional contributions cap.
7 Includes the low income tax offset of $700.
8 Calculated as taxable income less tax (i.e. $72,000 - $15,307 = $56,693), plus Transition to Retirement Pension income ($34,560).
Need help
- Register for one of our seminars
- Find out about our Retirement Options Service
- Call us on 13 43 72
Thank you for printing this page. Remember to come back to gesb.wa.gov.au for the latest information as our content is updated regularly. This information is correct as at 19 April 2024.